This Week in Petroleum History, March 30 to April 5

Massive waves during a North Sea gale capsized a floating apartment for Phillips Petroleum oil workers, killing 123 people. The Alexander Kielland platform, 235 miles east of Dundee, Scotland, housed 208 men who worked on a nearby rig in the Ekofisk field. Most of the Phillips workers were from Norway. The platform, converted from a semi-submersible drilling rig, served as overflow accommodation for the Phillips production platform 300 yards away.

April 1, 1911 – First Well of “Pump Jack Capital of Texas”

Electra was named after the daughter of local rancher W.T. Waggoner, who had once complained about finding oil when drilling water wells for his cattle. Photo by Bruce Wells

South of the Red River border with Oklahoma, near Electra, Texas, the Clayco Oil & Pipe Line Company’s Clayco No. 1 well launched an oil boom that would last decades. “As news of the gusher spread through town, people thought it was an April Fools joke and didn’t take it seriously until they saw for themselves the plume of black oil spewing high into the sky,” a local historian notes.

The well on cattleman William Waggoner’s lease settled into production of 650 barrels per day from about 1,600 feet deep. Hundreds of producing wells followed, leading to the Electra oilfield’s peak production of more than eight million barrels in 1913. Oil fever would return to North Texas in 1917 when “Roaring Ranger” erupted in neighboring Eastland County. A third major discovery arrived with the Burkburnett oil boom in 1918.

Thanks to a campaign by community activists, in 2001 Texas legislators designated Electra the Pump Jack Capital of Texas. The 2,800 residents today host an annual festival celebrating their petroleum heritage.

April 1, 1986 – Crude Oil Price hits Modern Low

World oil prices fell below $10 a barrel – a modern low for the petroleum industry. Causes included excessive OPEC production, worldwide recession (increasing supplies with declining demand) and a U.S. petroleum industry regulated by production and price controls.

“Saudi Arabia, tiring of cutting output to support prices, flooded the market,” noted Mark Shenk of Bloomberg News in 2015. “West Texas Intermediate (WTI), the U.S. oil benchmark, tumbled 69 percent from $31.82 a barrel in November 1985 to $9.75 in April 1986.” Oil prices recovered by 1990 and set a record peak of $145 per barrel in July 2008, before another price collapse to below $32 by the end of the year.

The Energy Information Administration predicted the 2020 price for West Texas Intermediate (WTI) oil to average about $58 per barrel (compared with $65 in 2018 and $56 in 2019). However, on March 9, 2020, WTI prices fell 24 percent to $31.13 per barrel after OPEC and Russia failed to agree on production limits amid falling worldwide demand.

April 2, 1978 – First Episode of “Dallas” airs on CBS

Marketed as a prime-time soap opera, “Dallas” debuted as a miniseries on the CBS network. The show featured the Ewing family and the independent oil company, Ewing Oil. The U.S. petroleum industry’s image would suffer for 14 seasons. J.R.’s shady business schemes and “unapologetic commitment to self-interest” attracted loyal viewers, noted show creator David Jacobs in a 1990 New York Times article. The cliffhanger, “Who shot J.R.?” mystery, the show’s third-season finale, led to the “Who Done It?” episode, which at the time was the highest-rated television episode in U.S. history, watched by 83 million people.

April 2, 1980 – President Carter signs Crude Oil Windfall Profit Tax

President Jimmy Carter signed the Crude Oil Windfall Profit Tax in 1980. It was repealed in eight years later.

One year after lifting price controls on oil, President Jimmy Carter signed the Crude Oil Windfall Profit Tax (WPT) into law. It would be repealed eight years later.

The controversial WPT imposed an excise tax on oil production. “From 1980 to 1988, the nation levied a special tax on domestic oil production,” explained historian Joseph Thorndike. Policymakers “imposed an excise levy on domestic oil production, taxing the difference between the market price of oil and a predetermined base price.”

The base price was derived from 1979 oil prices and required annual adjustments for inflation. A remnant of President Richard Nixon’s wage and price controls of 1971, WPT was meant to limit jumps in oil prices. But after eight years of the tax, domestic oil production fell to its lowest level in 20 years as dependence on imported oil increased, according to the Congressional Research Service. The depressed state of the U.S. oil industry after 1986 also compelled Congress to repeal the tax in 1988.

April 4, 1951 – First North Dakota Oil Well taps Williston Basin

A 1951 wildcat well drilled in a North Dakota wheat field revealed the 134,000-square-mile Williston Basin.

After eight months of difficult drilling and severe snowstorms, Amerada Petroleum discovered oil in North Dakota – revealing the Williston Basin two miles beneath the farm of Clarence Iverson near Tioga. About 30 million acres were under lease within two months of the discovery as petroleum companies rushed to the region. The giant basin would prove to extend into Montana, South Dakota and Canada.

According to historian James Key, in March 1951 the well had reached 10,500 feet deep before a blizzard ended operations. After resuming drilling on April 4, the well was perforated from 11,630 feet to 11,640 feet (using shaped charges, four holes per foot). Later that evening, “a new industry was born in North Dakota,” Key says. “This was the first major discovery in a new geologic basin since before World War II.”

The U.S. Geological Survey has estimated undiscovered resources within the Williston Basin’s Bakken Formation at volumes of 7.4 billion barrels of oil and 6.7 trillion cubic feet of natural gas. The 2013 USGS report included the Three Forks Formations in the Williston Basin Province of Montana, North Dakota, and South Dakota.

April 5, 1976 – Strategic Oil Reserves

President Gerald R. Ford signed the Naval Petroleum Reserves Production Act, which for the first time allowed full commercial development of the nation’s three Naval Petroleum Reserves. The legislation was a result of oil shortages created by the Arab oil embargo of 1973-1974.

Oil, natural gas, and liquid products produced from the Naval Petroleum Reserves were sold by the Department of Energy at market rates. According to DOE, one of the federal properties, the Elk Hills field in California, produced its one billionth barrel of oil in September 1992. While managed by DOE (until privatized in 1998), Elk Hills generated more than $17 billion in profits for the U.S. Treasury.